Random House, Penguin merging

Tuesday

Oct 30, 2012 at 6:00 AM

THE NEW YORK TIIMES

The book publishing industry is getting smaller to get stronger.

Confirmation on Monday that Random House and Penguin will merge narrows the business to a handful of big players, led by a new international giant, Penguin Random House. And it could set off a long-awaited round of consolidation, analysts said.

Bertelsmann, the owner of Random House, and Pearson, which owns Penguin, said Monday that they had reached an agreement to combine the two houses to create the largest consumer book publisher in the world.

Analysts said the deal between Bertelsmann, of Germany, and Pearson, of Britain, would give the combined companies greater scale to deal with the challenges arising from the growth of electronic books and the power of Internet retailers.

Together, Penguin Random House would have a global market share of more than 25 percent, and a book list that includes contemporary best-sellers like Random House’s “Fifty Shades of Grey” and Penguin’s back list of classics from authors including George Orwell.

With e-book sales growing, publishers are increasingly worried about the leverage wielded by Internet giants like Google, Apple and, especially, Amazon. These companies have huge resources to invest in new technology, including digital sales platforms and algorithms that steer people toward books that match their interests. Their scale gives them the power to negotiate better terms on book prices.

Under the agreement, no cash is changing hands; Bertelsmann, which owns Random House, would control 53 percent of the combined entity, to be called Penguin Random House, with Pearson owning 47 percent.

The remaining of the Big Six publishers could face increased pressure to respond to Penguin Random House, which will be based in New York. The other four are also owned by larger media conglomerates: HarperCollins, which is part of News Corp.; Macmillan, which is owned by Georg von Holtzbrinck of Germany; Hachette, whose parent company is Lagardere of France; and Simon & Schuster, a division of CBS.

Never miss a story

Choose the plan that's right for you.
Digital access or digital and print delivery.